Business groups claim hard-fought $20 hourly wage victory will cause reduced hours, layoffs and price hikes – critics say otherwise
As fast-food workers celebrated a pivotal wage increase to $20 an hour in California last week, an old economic debate was awakened by business groups and others claiming the increase will wind up hurting workers through reduced hours and layoffs, hurt customers with price hikes, and harm the franchise owners of fast food restaurants.
Their critics are not so sure.
The hard-fought wage increase to $20 an hour from California’s current minimum wage, $16 an hour, was a compromise to initial demands of $22 an hour with annual wage increases. Representatives of fast-food workers and the fast food industry came to a deal to avoid what would have been a costly ballot initiative over the passage and signing of the California fast food sector bill last year.
“Frontline workers like me organized, went on strike, and fought to pass a historic law that raises our wages and gives us a seat at table with some of the biggest fast food corporations in the world,” said Anjelica Hernandez, a McDonald’s worker in Los Angeles for nearly 20 years. “Even though we are the engine of a billion-dollar industry, too many of us struggle to keep with rent, our bills and the rising cost of living.”
Ah yes the classic “are working class people humans?” Debate.
Yalls standards are fucking LOW. And many if yall have kids. You would think that would light a fire under someone’s ass to make the world a good place to exist.
Did you ask your unborn child if they wanted to be exploited cradle to grave before you had that unprotected sex? No, because having kids isn’t about the kids at all… it’s about you you youuuu.
Dredging up an old article because this argument is also old:
McD’s workers in Denmark are paid $22/hr + 6 wks paid vacation.
One argument that is frequently brought up against the raising of the minimum wage to $15 is the suggestion that it will have a knock-on effect and the prices at affordable fast-food restaurants such as McDonald’s and Taco Bell will also substantially increase.
In rebuke, many use the price of a Big Mac in Denmark as proof that such claims are unwarranted. On social media, a number of Twitter users state that the cost of a Big Mac is around $5.15, compared to $4:80 in the U.S.—even with the vastly different staff wages.
https://www.newsweek.com/minimum-wage-15-denmark-big-mac-mcdonalds-1573414
I wouldn’t say they cost $10, but they’re definitely charging $10 for them.
8.29 big mac. 12.19 for the meal. 3.49 hashbrowns.
No deals no sales. Been this way since at least covid.
Now then again the local diners burger is 13 bucks and one step nicer the burgers hit 15-18 and any nicer you lose sides at that cost.
But that said every news and economy article talking about big macs and mcdonalds prices, even as recent at January 2024 say Big Macs are $5-6.
So prices are legitimately up, but we are being lied to as to how much and why. The measurements appear to be intentionally off.
This argument has always been absolutely ridiculous. McDonald’s doesn’t set prices based on their costs. McDonald’s sets their prices based on what people are willing to pay. Why would they charge $4.80 when people would be willing to pay $5.15? That would be an extra $.35 profit if they charged more with no increase in costs.
While this means that there will be less profits, the worst case scenario is that fast food places determine that they can’t make profits and will shut down. They’ll use this as an excuse to bump their prices to more than compensate for their lost profits.
Remember, prices arent simple functions of cost. The business owner isn’t tabulating costs to produce a product, and then adding a standardized profit markup to determine price. Generally it works in reverse. A business owner introducing a new product into a market is competing with the prices already in the market. If your product is of similar quality, you’re not gonna sell your product for much higher than that market price, no matter how much it costs you to make. Instead, you increase your profit margins by reducing costs as much as you can. Like say, fighting against legislation like this to pay your workers less.
Now, there probably will be some price increases from this, same as there was from the pandemic, because people will expect to pay more because they think that’s how prices work. But they can only get away with so much increase, anyone that keeps prices low gets an advantage over the competition.
Also, the threats of reduced hours and layoffs is a pretty empty threat. Again, employment isnt a simple function of cost. Business owner isnt budgeting a set amount of earnings to hire with. An employee is there to handle customer demand. If you don’t have the employees to handle the demand you’re getting, you’re losing sales. Especially in fast food where consistency is so important to customer retention. If you’re short on fry cooks and have to turn down a bunch of customers hoping to get fries with their meals, they’re gonna go elsewhere eventually. But they also dont want more employees than they need to meet that demand, thats eating into the profit margins. This is why fast food workers get so stressed, employers try to meet the most demand with the lowest amount of labor cost. Again, there might be some temporary layoffs and hour reductions as employers try to stretch their labor even thinner, until they realize they were already stretched to the limit and have to hire back.
Exactly. In Econ class we used the elasticities of supply and demand to see who “paid” for the tax or additional costs. Business owners will try to push it off if they can, but because of prices people are willing to pay, they often eat a large portion out of profit.
Yeah, it’s pretty clear that this increase in wage will bump up the end cost of ordering at these restaurants but like… it’s by such a small margin where anyone complaining about it is a massive dork.
Big Mac is 30 cents more expensive so staff can get paid (closer to) a living wage. That’s a very fair trade off for the American people
Business groups claim hard-fought $20 hourly wage victory will cause reduced hours, layoffs
David Card was awarded the Nobel Memorial Prize in Economic Sciences for showing that this isn’t true.
(The study (PDF warning))
What was special about this research that won the guy the award?
According to Card:
the thing that has really influenced the field is the idea of looking for these pivotal events or things that have happened that could potentially inform our theorizing and understanding of the world.
That is to say, they actually looked at real world examples and compared (meaning they actually included evidence in their reasoning) rather than assuming it must be so based on neoclassical economic assumptions.
I’m not sure most people understand how neoclassical economics is based on “arm chair general” style models largely divorced from reality.
And how horrible an ideology it really is to have had infiltrate every aspect of western life and culture.
The more I look at it, the more I see how a large part of our current societal issues can be laid at the feet of this ideology masked as science.
“Mechanical” models that have a veneer of legitimacy have certainly compromised peoples’ view of reality. See also views of traffic that treat it like a liquid, so politicians keep advocating for “just one more lane” despite induced demand being proven close to a 100 years ago.
